Cos with less than 30pc stake of sponsor-directors to face the music

Twenty-three listed companies have been ordered to appoint at least two independent directors within 15 days, who will ensure compliance with the regulatory requirement of minimum 30 per cent joint stake of sponsor-directors in the organisations.
The firms will also have to submit a comprehensive plan on meeting the obligation, according to a directive issued by the Bangladesh Securities and Exchange Commission (BSEC) on Sunday.
The commission will impose penalty on the defaulters after the month of September this year, reads the BSEC order.
The non-compliant companies include Aziz Pipes, AFC Agro Biotech, Generation Next Fashions, Intech, and national Bank.
The regulator decided to take tough actions this time against the backdrop of violation of its previous orders on appoint of independent directors over the matter of minimum shareholding of sponsor-directors.
For example, sponsor-directors of Familytex (BD), offloaded their holdings long ago to exit the company that has been out of operations. Their joint stake dwindled to 4.02 per cent.
Members of the restructured board of the company also resigned one year ago due to non-cooperation of the sponsors in efforts to get it back into operation.
BSEC spokesperson Mohammad Rezaul Karim said the regulator would not compromise with non-compliant companies any longer.
The regulatory rules allow an imposition of fines starting from Tk 0.01 million.
"The severity of punishment will depend on the level of non-compliance of the defaulters," Karim added.
In December 2020, the BSEC gave the same instruction but to no avail.
It had failed to ensure compliance with another order given after 2010-2011 stock market debacle, linked to the distribution of shares of a listed company.
The market collapse led to the introduction of the provision for minimum 30 per cent joint holdings of sponsor-directors so they became more responsible for company affairs.
Creating demand for shares in the then volatile market was another motive.
Every sponsor-director, other than independent directors, was also asked to hold a minimum 2 per cent of the shares of their respective companies.
The directive issued at the time was challenged in the upper court by many sponsor-directors with stakes lower than the requirement. But the apex court gave its verdict in favour of the regulatory decision.
Meanwhile, the boards of another five companies -- FAS Finance & Investment, Ring Shine, Fu Wang Foods, C & A Textiles, and Ring Shine Textiles - have been restructured, which breached the provision.
Independent directors have already been appointed to these firms.
Asked if these companies will also have to appoint two more independent directors, a BSEC official said the regulator itself, if needed, would appoint independent directors to these companies.

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